Hong Kong to launch Pilot project for Digital Yuan

Mainland’s First cross-border pilot project for the digital yuan is poised to be jointly launched by China and Hong Kong as the People’s Bank of China (PBoC)-led project gets closer and closer to becoming live.

Howard Lee, the Deputy Chief Executive of the Hong Kong Monetary Authority (HKMA), told Shanghai Securities News that Hong Kong will serve as the “first cross-border pilot location for digital yuan outside of Mainland China.” Lee did not, however, specify a timeframe for this.

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In advance of the transfer, “technical testing” has reached a “second stage,” according to Lee. He asserted that the HKMA’s tests’ “scope and scale” had “been increased.” He added that there were now “four commercial banks involved, up from one.”

Hong Kong is moving toward digital yuan interoperability.

The Greater Bay Area, comprised of nine nearby cities in the southeast, is the region’s economic hub, and the PBoC intends to link the pilot to it (GBA).

Hong Kong is one of the nine cities that make up this network. Despite being technically a part of China since 1997, the latter nonetheless enjoys a special administrative regional status. Additionally, it still has its own distinct political, economic, and monetary systems.

Lee, who is in charge of the HKMA’s fintech and financial infrastructure operations, said:

“Hong Kong will continue to fully support the development of the digital Yuan (CNY), and promote the interconnection of the GBA. It will increase the speed and efficiency of cross-border payment services.”

Lee added that a “swap link” project was almost finished. This instrument will enable bond markets in the Mainland and Hong Kong to communicate with one another, and it may also play a role in the eventual adoption of the digital Yuan (CNY).

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Additionally, the Bank for International Settlements and the HKMA and PBoC are collaborating on a central bank digital currency (CBDC) project. The mBridge pilot project, which involves the Thai and UAE central banks in addition to the HKMA, PBoC, aims to test out cross-border payments.

The project, which involved 20 commercial banks, was finished in late September after processing transactions totaling $22 million. The “biggest CBDC trial in the world,” according to Lee, is mBridge. Using a range of CBDCs to carry out actual settlements for cross-border transactions, the scheme was the first, he said.